Starboard urges GoDaddy to set ‘prudent’ steerage

Activist investor Starboard Worth on Wednesday despatched a letter to web-services firm GoDaddy, urging administration to continue moving “in the right direction” by setting particular and practical progress targets and offering buyers with extra element on how administration will enhance margins.

Starboard has a greater than 6% stake within the firm, and has been pushing the corporate to develop free money move and enhance margins.

Starboard managing member Peter Feld wrote in Wednesday’s letter that whereas GoDaddy had made a great first step on its most up-to-date earnings call in setting new profitability targets, “a few months of share price outperformance do not solve a multi-year problem.”

GoDaddy CEO Aman Bhutani signaled on that decision that the corporate needed to “be responsive to the feedback from investors” on progress and enlargement, a tacit acknowledgment of Starboard’s preliminary letter.

GoDaddy shares are up round 47% because the November earnings name.

Starboard nonetheless believes there’s extra work to be achieved. GoDaddy ought to intention for a minimum of 40% progress and profitability for the 2025 fiscal 12 months, Feld wrote. Feld additionally highlighted GoDaddy’s “robust and increasing” free money move, and mentioned that the corporate ought to proceed to repurchase its undervalued shares.

“On revenue growth, we would again urge GoDaddy to be prudent with its growth guidance and not provide guidance that is based on an aspirational view of the business,” Feld wrote.

The activist investor famous that GoDaddy’s a number of continues to be closely discounted relative to its peer group. Of the 20 firms in peer group in Starboard’s letter, GoDaddy has a better a number of than solely TeraData and Box.

Starboard believes that GoDaddy can obtain free money move of $9 per share by this fiscal 12 months, and $14 per share by fiscal 12 months 2026. These targets are greater than GoDaddy’s $6.1 free money move per share for the fiscal 12 months ending September 2023, in response to FactSet information.

The letter was despatched to Bhutani and CFO Mark McCaffrey, in addition to GoDaddy’s board. Starboard despatched its first public letter to GoDaddy in September and says it has had a place within the firm since 2021.

GoDaddy didn’t instantly reply to a request for remark.

Starboard Worth is broadly considered a number one activist investor, with a give attention to operations enchancment and lively engagement with administration. It has led campaigns at or engaged with quite a few firms in recent times, together with Field, Bloomin’ Brands and Salesforce, in response to information from 13D Monitor.

WATCH: Starboard’s Jeffrey Smith on the state of the market